The Australian mining industry is currently experiencing a renaissance with demand for booming resources like lithium, gold and base metals like copper, nickel and iron ore. Other short-term factors also exist such as the rearranging of operations and subsequent recovery dueto the economic impact of the COVID-19 pandemic. Additionally, the renewable energy agendas that governments around the world are beginning to implement has effectively created the perfect scenario for the mining sector to prosper. With mining companies big and small pivoting their strategies to take advantage of these opportunities, what trends can we anticipate from the industry?
1. Sustainability & ESG
Sustainability is fast becoming one of the major trends that the mining industry is taking heed of. The mining and resources sector has come a long way over the past few decades where care and responsibility for the environment and local communities was usually an afterthought. Today however, miners such as Rio Tinto and BHP are taking an aggressive approach towards ensuring their businesses are sustainable and meeting goals to mitigate climate change.
Rio Tinto for instance is
spending $1 billion over the next five years towards climate change related projects. Currently the company attributes 75% of its electricity usage from renewable sources, thereby reducing its emissions. Of course, sustainability doesn’t just encompass the environment and climate but also includes the social impact that these businesses have on local communities.
BHP has excelled in this arena with strong policies and enforcements towards positive causes for local communities and indigenous peoples as well as human rights assurances.
2. Resource Access & Quality
With quality raw materials supply slowly becoming exhausted in low-risk, easy to access areas, mining companies will have two options. Either master new technologies for efficient extractive and processing activities or venture into riskier areas where mine site extraction has not previously been economically viable.
More audacious mining projects will arise with interest being placed on searching for high-grade resources in deep sea deposits. Even more daring is the idea of asteroid mining that
government agencies (NASA) and companies are constantly exploring.
3. Escalating Expenses
Searching for new, riskier resources results in the challenge of reducing the imminent rise in expenses in order to reach increasingly slim deposits. In Australia alone, expenditure for mineral commodity exploration in 2020
equated to nearly $2.8 billion. The costliest exploration commodity was for gold with
$1.3 billion being spent in search of the precious metal due to its high demand as a ‘safe haven’ asset.
Companies like BHP and Rio can afford to take these risks due to their large cash reserves and sturdy portfolios which can be borrowed against. Smaller outfits however will struggle to afford these costly exercises, but innovative options may exist to keep these companies competitive and capital expenditure low.
An evolving solution to these dizzying costs is for governments to step in and either stake ownership in these companies or financially support their operations. Chinalco, a China based mining company, is 85% owned by the government and is now actively expanding its exploration for copper in Peru. Similarly, the Saudi Arabian company Ma’aden,is 75% owned by the State and now boasts six gold mines and a growing exploration budget of over USD$65 million. These two examples show the potential for smaller businesses to remain viable in a competitive environment and avoid a downturn in their business success.
Mergers or joint ventures are a longer-term option that companies can take to stay relevant and viable. Barrick and Newmont are a great example of two specialist gold miners who joined forces in 2019. Not only did this result in the creation of the
world’s largest gold complex but the existing synergies resulted in more streamlined operations for both businesses.
4. Innovative Technology
New world class technologies, such as Artificial Intelligence (AI) and chemical processing, will significantly help locate new resources and the financial viability of extracting them. AI will also play a significant role in mining operations which will drastically help mines optimize their processes, saving significantly on their expenses and adding to profitability.
An example of the technology being used is by the Australian company Earth AI. Its technology uses a range of data points from a variety of sources – such as NASA and open-sourced data from Geoscience Australia - which develops an intricate database of global mineral resource deposits. It then uses this information to predict where future deposits may exist in unexplored regions. A pilot study conducted in 2018 hit impressive results with potential
deposits being identified for a mere $11,000 compared to the millions of dollars that are usually spent for traditional prospecting methods.
5. Data With the incorporation of innovative tech comes the collection and processing of massive amounts of data. This data will not only be crucial for understanding business operations and where risks/opportunities but will also be highly sensitive information. Deciding what data should be shared and made transparent and which should be kept private.
Governments, consumers and investors alike will be eager to access this data in order to ascertain tax structures, value chain transparency and investment risks/opportunities respectively. Other forms of data will show the impact these companies are having on both local communities and the environment as a whole which organisations will be eager to get their hands on. Key to this explosion of data then will be for companies and stakeholders to undertake tandem decision-making in order to understand what data should be made transparent to ensure standardization, efficacy and impact.
6. Evolving Workforce
The Australian mining industry
employs approximately 279,000 people, accounting for just over 2% of the nation’s total workforce. With mining activities becoming more modern, technologically advanced and relying on AI and automation, mining workforces are set to become more specialist and less labour heavy.
This transition will see an influx of highly skill individuals, particularly from IT backgrounds, entering the mining industry, with some existing employees requiring significant upskilling to evolve in their roles. Companies will have to work closely with governments to ensure the transition of workers who will inevitably be replaced by automation are either retrained or shifted to other industries where their labour is beneficial.
The Australian, and global, mining industry is gearing up to become one of the most exciting sectors to follow due to the growth that the renewable industry is currently experiencing plus the normality that many countries are resorting back to post the Covid-19 pandemic. With the mining market set to
grow to around USD$2.4 trillion by 2025, gripping trends are likely to arise from both technological, innovative and industrial perspectives.
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09 Sep